January 26, 2012

Value of Nets rises 14% despite huge losses; the new arena/market must be key

Atlantic Yards Report

The numbers are stunning. The New Jersey Nets, soon to be Brooklyn Nets, have the third-highest debt to value ratio in the National Basketball Association, at 79%, according to Forbes. The team lost the third-most in the last season, $23.6 million.

Yet the value of the Nets rose 14%, from $312 million to $357 million, according to Forbes, vaulting the team from 21st (of 30) to 14th place.

In the 2011 rankings, the value had risen 16% on losses of $10.2 million, though with an astronomical 224% debt/value ratio.

The article does not go into the explanation, but the opening of a new arena in the new Brooklyn market, is surely key; it offers new revenue streams and sponsorships, and a more valuable TV deal.

A couple of years ago, the New Jersey Nets’ planned move to Brooklyn had that look of a pipe dream not ready to come true. Neighborhood activists had already been holding things up in legal bottlenecks. Once that hurdle was cleared, a severe recession made arena financing more complicated and costly for owner Bruce Ratner.

Solution: find some major capital, quickly. Ratner sold off 80% of the team and 45% of the Barclays Center project to Russian billionaire Mikhail Prokhorov, who immediately became the NBA’s wealthiest owner, surpassing even Microsoft co-founder Paul Allen. The sale paved the way for the Brooklyn Nets to become a reality by next season.